tv Nightly Business Report PBS April 20, 2012 7:00pm-7:30pm EDT
>> susie: from fewer new jobs to weaker home sales could the u.s. economy be cooling off this spring? >> i think some of the steam that we were picking up was, in fact, related to unusually warm weather and in sense was a hip fake of sorts. >> tom: and thousands of barrels of oil and billions of dollars in damage claims later. today marks the second anniversary of b.p.'s gulf oil spill, louisiana senator mary landrieu will join us. it's "nightly business report" for friday, april 20. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> susie: good evening, everyone. tom, that it's the traditional the u.s. economy is faltering. >> tom: susie, this has been the >> susie: we've seen some disappointing results in the housing market, some signs manufacturing is slowing and darren gersh takes a look at the downshift in expectations. >> let's start with the good news. even with higher oil prices, the after effects of the housing bubble and everything that is still going on in europe, the u.s. economy is growing. and it's proved stronger than the skeptics feared.
but just one month ago, the economy seemed to be powering along at a 3% clip. now, that momentum is almost gone. >> i think some of the steam that we were picking up was, in fact, related to unusually warm weather and in sense was a hip fake of sorts, an economic hip fake of sorts that made the date coming in look better than it actually has been. >> reporter: housing now looks softer than expected, surveys of industrial production are flashing yellow. and unemployment claims are rising. the difference between a 3% growth rate and the 2% that economists now expect will be noticeable. we think that it's going to be difficult for the unemployment rate to make much further headway from here. we're looking more for a sideways pattern there. that initial boost in employment in the winter is looking more and more like a result of a warm winter in traditionally cold sates. it also looks like businesses filled up empty warehouses in the first part of the year, and those inventory builds look like another hip fake.
>> i don't think we're developing an inventory problem, but the sort of special boost that we've gotten in the fourth quarter and perhaps early in 2012 -- that is probably diminishing at this point. >> reporter: now we have reached the disclaimer that every economic story of the last couple years must carry: if europe implodes, if oil prices shoot up, if washington gridlocks, the economy could tank again. but the u.s. economy continues to heal. the federal reserve is keeping interest rates low. companies have plenty of cash. so we may not have to relive last year's round of double-dip recession fears. i think it is safe to say the economy is struggling against pretty strong headwinds and i would not expect a return to robust looking growth until well into 2013. >> reporter: but we won't know for sure if the slowing we are seeing now is just a weather giveback or a real concern for a few more months. just one more uncertainty you can add to the list. darren gersh, "nightly business report," washington. >> tom: between the weaker economic signs and corporate earnings, the stock market ended
today with mixed results. the dow gains 65 points, but the nasdaq fell seven, the s&p 500 was up a point and change. for the first time in three weeks, the dow industrial average moved higher gaining 1.4% compared to last friday night. but the nasdaq was the loser among the big three indices, falling 0.4%. the s&p 500 was up 0.6% this week. >> susie: today marks the second anniversary of b.p.'s deepwater horizon disaster in the gulf of mexico. that explosion killed 11 workers and spilled 200 million gallons of oil into the gulf for 80 days. from landowners to the small businesses that depend on the
gulf for their livelihood, the damage was extensive. >> reporter: it was the largest oil spill in u.s. history. beaches closed, so did restaurants and hotels. and massive amounts of tainted gulf shrimps and oysters were tossed out. two years later, there is still plenty of unfinished business. over a million individual claims have been filed, 220,000 of those claims verified and paid and nearly 21,000 more remain to be vetted. b.p. has paid $14 billion in cleanup costs. $6.3 billion in damages to individuals and it's pledged nearly $8 billion more for its class action settlement with gulf businesses and homeowners. the oil company may also likely owe several billion dollars for damages to natural resources under the natural resources act. and as much as $20 billion u.n. penalties under the clean water act. with the recovery work continuing, u.s. oil producers and others are looking to add new production in the gulf.
there are now 41 deep water oil rigs operating in the gulf, slightly more than before the spill. but they face new regulations on offshore drilling and a tougher qualifying process that gives environmental concerns a higher priority in the permitting process. >> susie: for more on the state of the gulf of mexico, we're happy to have with us. louisiana senator mary landrieu. >> susie: thank you for joining us. >> thank you so much. >> let me begin by asking you to describe the health of the economy in the gulf. is it back to normal or still struggling? >> well, actually, the unemployment rate is lower in louisiana and in texas than in the rest of the country, and that's due to an uptick in production, both onshore and off. having said that, we're still not up to prespill levels. but the demand for oil and gas and the new technologies expanding gas lines helping to boost our economy, but our coast is still suffering because of
the ecological damage done to it and because of the moratorium put down by the administration, which i thought and many people thought was an overreach. improving safety was important, but shutting down the whole industry, in our opinion. but people are just about back to normal, but we still have a lot of degradation and impacts to address. >> susie: tell us a little bit about the how the status of deepwater drilling as we reported. there has been a slight uptick in the number of rigs operating in the gulf. how would you describe oil production there? is the oil business robust? >> it's strong but it's not as strong as it would have been, of course, and that's of course and that's what people are very concerned about. we had many, many smaller suppliers and independent operators that were caught up in this mess, if you will. they're not deepwater operators. they were shallow-water operatores, but, yes, the
moratorium shut them down as well. but they're getting back up. they're stronger. of course our fishermen are struggling to come back. but the real keys too whether congress will act to pass, finally pass the restore act, alcohol dedicate 80% of the penalty money b.p. is going to pay, and instead of sending it to the treasury, leaving 80% of it right here in the gulf coast where the injury occurred to help us to restore our wet lands, the research necessary to prevent these things from happening again too, research better, of hue to save our wildlife, et cetera. this is a very dynamic, fragile, but vibrant place and we need the resources to sustain it, which helps the whole country and the world. >> susie: now that you brought up the whole part about claims, let's talk about the whole damage claim. how satisfied satisfied are you with the way that was handled? >> there was an article today that an independent audit has
been done about ken fineberg's claims process that found he was about 98% accurate. that's not to say that's everybody down here in louisiana, along the gulf coast is satisfied, but it was kind of gratifying to see that the system that was set up worked for the most part. now, some of those cases were not settled by ken fineberg, and all of this money b.p. has paid-- not taxpayers. b.p. is paying every dime, and on top of that, they're paying penaltiepenalties to boot. this is not taxpayers. but in the court, there are some major lawsuits going on in the courts down here to settle big, private claims, and then of course in congress, we have our bill that b.p., when they pay their big oil penalty, which is $1,000, or $4200 for every barrel they special we want that money reinvested in the coast and our environment. >> susie: i want to ask one quick question before we leave you. are people in louisiana prepared
if some kind of crisis like this happens in the future? is your response time going to be quicker? >> i think so. the question is, is the whole gulf coast better prepared? and the answer is,'re, yes, we're better prepared. we drilled 40,000 wells, and this is the first time a major incident has happened. we can never 100% guarantee this will never happen again, but we can put smart regulations on and get the money invested well and wisely, and that's what we're trying to do. >> susie: it sounds like you're doing a lot. senator, thank you for joining us tonight. we have been speaking with louisiana senator mary landrieu. >> i'm erika miller. still ahead on n.b.r., from hair to formal clothes, kids are spending hundreds of dollars on a high school rite of passage. we look at the prom economy. >> tom: mcdonald's continues seeing business pick-up, but even the golden arches aren't immune to the mixed signals on the economy. the company called the economic climate challenging, yet
earnings are growing. mcdonald's earned a $1.23 in the first quarter, right on target. its value menu remains a strong selling point for customers. in-coming c.e.o. don thompson is looking for a new extra value menu and the cherry berry chiller drink to help its summer business. >> susie: fellow dow component general electric also ended higher in today's session, thanks to better than expected first quarter results. g.e. says demand was strong for energy equipment and railroad locomotives. c.e.o. jeff immelt also confirmed the company is on track to post double digit earnings growth this year. g.e. earned 34 cents a share, a penny ahead of expectations. revenue came in at $35 billion for the quarter, about a billion dollars more than analyst estimates. >> they are growing quite nicely in their core businesses. one of the things coming into the year we were concerned about was europe and healthcare and whether the downturn in europe
that's actually showing some robust growth and healthcare and europe is not quite a concern as we thought in the beginning of the year. >> susie: shares of the largest u.s. conglomerate ended up 22 cents or 1% at $19.36. >> tom: there's more financial firepower tonight to fight the debt crisis in europe. the g-20 group nations will pony-up more than $430 billion to the international monetary fund. this almost double's the i.m.f.'s lending power to deal the euro-zone's government debt problems. but the u.s. is backing out of a pledge it made in 2009, saying europe does not need help from america. >> susie: disney shares moved higher today as its movie studio chief heads for the exits. rich ross, the man behind the studio's colossal spring movie flop "john carter" told employees he was leaving the company because the job was no longer the right fit for him. disney lost $200 million on
"john carter" and it expects to take a quarterly loss on the flop. tom, before taking over the film studio two years ago, he led the disney channel. he had a lot of successful hits like "hannah montan" "high school musical" but it didn't work on the big screen. >> tom: it's a tough business with a very short memory for a lot of folks, susie. we had a mixed market overall. a couple of technology giants both helped and hurt the broad market today and both may have been driven by earnings. first, the leader, microsoft. shares jumped 4.5%. volume more than doubled to more than 100 million shares. this was the market reaction after microsoft reported stronger than expected earnings and sales last quarter. but apple continues seeing volatile trading, sinking 2.5%. this pushed the stock below the price it hit during monday's sell-off. apple is now down 10% from its high earlier this month, closing at a one month low.
apple has seen considerable volatility this week, ahead of its earnings report on tuesday. thanks to apple's size, more than a half billion dollar market value, the technology sector was the biggest drag on the market, sliding a half percent. while investors favored the more defensive utility stocks with that sector up 1%. also weighing on tech stocks was flash memory maker san-disk. it warned that a glut of inventory will hurt prices for the rest of the year. that warning certainly hurt the price of san-disk down 11%. volume jumped more than six fold. this is its lowest price since september. utility stocks saw a big rally last year, but that buying interest waned earlier this year as the economy seemed to be picking up steam. but as economic worries have come back in focus in the u.s., power company stocks have rallied. natural gas utility one-ok is at a one moth high after today's 2.3% rally.
n.r.g. rebounded by 2%. it was at a 52 week low on monday. and x-cel energy gained more than 1.5%. financial stocks were also a drag on the market. bank of america was the biggest percentage loser among dow industrial stocks as one influential analyst said it was time to sell. and that's what many investors did, sending shares down almost 5%. calyon securities banking analyst mike mayo said the banks first quarter results this week were "likely as good as it gets." he downgraded his view from under-perform to sell. and with an $8 price target. they closed at $8.36 per share. with american airlines still in bankruptcy, three of its labor unions support a proposed merger with u.s. airways. such a deal would make the combined airline the biggest on the east coast and midwest. the unions okay puts pressure on a.m.r.'s management to talk with u.s. airways. shares of u.s. airways didn't move much on news of the union support, but they did pull back
from their recent rally. the stock was down about 2% today. earlier, we mentioned general electric's earnings, another conglomerate, honeywell raised its profit outlook after a strong first quarter. that had shares moving, up almost 2.5%. honeywell pointed to demand in the u.s. and other areas more than making up for the weakness in european sales. while stocks digest the earnings and the economy, bond interest rates continue near their recent lows with prices higher. the yield on the ten year government bond continues below 2% at 1.96%. that at the bottom end of the range this year. as bond rates drop, bond prices rally. and that's tonight's market focus.
>> tom: during earnings season, it's easy to focus on the u.p.s. and downs of quarterly profits, but our friday market monitor says reality is more stable than perception. ed perks is portfolio manager of the franklin balanced fund and the franklin income fund. is it ed, welcome back. always great to see you. >> good to be with you, tom. >> tom: what is perception here? the european economy is in recession, the u.s. economy is slowing down. if that is perception, what is your reality? >> i think what's interesting is we see perception move around quite a bit. you don't have to go back that far to late last summer, when perception was have, very poor. subsequently improved a little bit, we've seen equitieseraly and now we're stalling out a little bit coming back to the the realization that things are relatively modest or slower growth in the u.s. and, yes, europe still has some
tremendous challenges. >> tom: do you think we're seeing a repeat this spring of last spring and that could mean significantly lower stock prices. >> i think it's important, also, to recognize and acknowledge that we actually have made quite a bit of progress as well. so-- and over the subsequent period of time, countries have continued to perform very well. profits have stayed relatively high. balance sheets continue to improve. so while, yes, challenges still exist, we are make progress. we are seeing some improvement in the economy and corporate fundamentals are still very healthy. >> tom: technology this week was certainly in focus. intel was one of those that brought it in focus. i.n.t.c. this is one of your picks here. earnings were not spectacular, and we saw a little bit of a sell-off. are you a buyer on this pullback? >> we really like intel. we continue to hold the stock in the portfolio, and it's really a couple of things. first, looking at intel, 3% dividend yield, very attractive when you take that into relation to the overall level of long-term interest rates in the the u.s. now reasonable valuation as
well, relative-- 11.5, 12 times earnings estimates. about a third of the earnings take the form of dividends. when we look back, we've seen double-digit dividend growth over the last five years as well. when you look at that company's balance sheet b1 first're 30 billion market cap, they have more cash than debt. we like the overall profile. when we look at the business we like their leadership position in manufacturing, in architecture, and we think expectations are relatively low in terms of emerging mark of markets like tablets and cell phones. >> tom: i mentioned the move back into utility stocks today. you're month those. american power is among your utility pickes, clearly has underperformed the market over the past quarter or so. looking on a valuation perspective? >> utility is our largest sector
on the equity side in franklin income fund. as you mentioned, it has underperformed more recently. as we look at that with a 5% dividend yield today which we think is stable, is covered by the regulated utility, that that's very attractive. there is some uncertainty raderring a rate case in omit that we think the company will gradually get through over the course of the year enabling the shares to improve. >> jim: glom what about intel and a.e.p. do you own these shares? >> you know, franklin income fund is my largest personal holdings so, yes, through my investment in the funds, i do hold those shares. >> tom: our market monitor guest with a grasp on reality, ed perks. >> susie: the economy may be weak, but that isn't stopping american families from going all out on prom. back in the day, you probably borrowed your father's car and did your hair at home. we don't have to tell you times have changed. the average family will shell
out over a thousand bucks for that special night. yes, you heard me, a thousand dollars! erika miller has a closer look at this high school rite of passage. >> would it make you feel any better if i asked you to the prom? >> reporter: it's a familiar scene from "pretty in pink"-- capturing the essence of prom '80's style. back in the '50's, women dressed like this. nowadays, the gowns are more glitzy. but it's not just fashion that has changed, prices have, too. brace yourself for what some girls in new york city spend on hair alone. >> they can spend easily $500, $600, $700 on their hair. they get their hair cut, we suddenly introduce them to color for the first time for this big moment, and then they get the styling. >> reporter: now add on the cost of the perfect dress or a fancy tux, make-up and jewelry. not to mention all the other extras and dinner, and it's easy to see why spending on prom is now at an all time high. here's something interesting: prom costs have spiked 34% in
just one year. but there's no surprise in who is picking up the tab. parents plan to pay 61% of prom costs. so teens have little incentive to be thrifty. >> teenagers have always wanted things they can't have. they've always wanted expensive things that aren't practical. that's part of growing up. but it's our job as parents to set limits to say this is what's acceptable. >> reporter: northeastern families are likely to pay the most, shelling out more than twice as much as every other region. but there's a far more disturbing statistic. >> we found that families that made between $20,000 and $30,000 spend two and a half times the national average on the prom: $2,500. in contrast, people who-- families who made over $75,000 spent under a thousand dollars. so those who can least afford it are spending the most. >> reporter: perhaps it has to do with the pressure on the day. >> suddenly, you have this opportunity to shine on that one night and they really take it
seriously in how they want to present themselves. >> reporter: after all, we all know prom is more than just a dance. it's a lifetime of memories. after all, who could forget this dress erika miller, "nightly business report," new york >> tom: here's what we're watching for next week. will it be another blow-out quarter for apple earnings? plus, feeling the heat with more competition online. how will netflix fare? we'll see quarterly results from both companies. and, this may look like a normal public school classroom, but you might be surprised at how the teach for america program gets its funding. we kick-off a week long look at how crowds on the internet are using their power to raise money and create change. >> susie: and finally, while many americans are buried in debt, others are buried in keepsakes and mementos from the past. here's lou heckler with tonight's "lou's been thinking." >> a few years ago, a writer friend of ours, ralph keyes,
wrote an article about savers and disposers. savers are packrats. at their worst, they end up on the tv show "hoarders." once a disposer has an item in their possession they look for a way to get rid of it, donate it or recycle it. i have always thought of myself as a disposer? but as i get older, i am finding more and more comfort in saving some of the things that probably ought to be passed along: the red double-decker bus that reminds me of a trip to london. a snowman with no arms our son made 35 years ago. a kaleidoscope that prods me to see the world through mew colors and shapes as i turn it. as i think of these items, i really find myself on the fence. on one hand, i don't want to live in the past and be a grumpy old guy talking about how great things used to be. on the other, each of those items reminds me of how i got to this point. i am unendingly fascinated as i age that so many things i worked hard for now seem interesting in their own way, but not as alluring as they once appeared. i know now that the world moves at the speed of relationships and that those of us who have been blessed to be encircled by
wonderful people have in them all the genuine keepsakes we really need. but, i guess i'll hold on to this other stuff as well. i like it. i'm lou heckler. >> tom: it's tough when it comes from the kids to throw them away. you have to save them. you have to file them away when they get older. >> susie: i have so many barbie dolls and baseball cards, tons of them. >> tom: keep them, susie, keep them. i don't need them. >> susie: so hard. that's "nightly business report" for friday, april 20. i'm susie gharib. goodnight, everyone and have a great weekend, you, too, tom. >> tom: goodnight, susie. i'm tom hudson we hope to see all of you again next week. "nightly business report" is made possible by:
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